Write the business transaction corresponding to the following entries: a) Drawings a/c Dr. 500 To Canara bank a/c 500 b) Advertisement a/c Dr. 200 To purchase a/c 200
Understand the Problem
The question asks to interpret accounting journal entries in terms of business transactions. Specifically, it requires describing the business events that would result in the given debit and credit entries for drawings, Canara Bank, advertisement, and purchases.
Answer
a) Proprietor withdrew 500 from Canara Bank for personal use. b) Advertisement expenses paid with goods worth 200.
a) The proprietor withdrew 500 from Canara Bank for personal use. b) Advertisement expenses paid by goods worth 200.
Answer for screen readers
a) The proprietor withdrew 500 from Canara Bank for personal use. b) Advertisement expenses paid by goods worth 200.
More Information
Drawings are the cash or goods withdrawn by the owner from the business for personal use. When a proprietor withdraws cash from the bank for personal use, it is recorded as a debit to the Drawings account and a credit to the Bank account. When a company pays for advertisement expenses with goods it is recorded as debit to advertisement expenses and a credit to the purchase account.
Tips
A common mistake is not understanding the difference between drawings and other expenses. Drawings are specifically for the owner's personal use.
Sources
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